Valuation methods for high growth companies

Putting a value on a business isn’t one-size-fits-all.

Whether you’re raising capital through equity crowdfunding, preparing for a sale, or just benchmarking your progress, the right valuation method depends on your business model, growth stage, and industry dynamics.

At OnMarket, we’ve worked with businesses across all stages, from early growth to expansion-ready, from Seed Funding to IPO. No matter the stage, our expertise at OnMarket can help set fair valuations that reflect your business’ potential and stand the test of investor scrutiny.

Below we will discuss some of the most common valuation methods employed, what each is useful for and who they are suitable for.

1. Discounted Cash Flow (DCF)

How it works:

DCF valuation estimates your business’s present value by projecting its future cash flows, typically over 5 to 10 years and discounting those cash flows back to today using a discount rate (usually your Weighted Average Cost of Capital or WACC). The value also includes a terminal value which is a lump sum representing all cash flows beyond the projection period into perpetuity.

Why it’s useful:

It provides a deep, forward-looking view of value, factoring in both time and risk. DCF is especially powerful when a company has growing revenue and profitability as the value showcases long-term value creation. It considers internal value creation, not just market sentiment.

Suitable for:

Early-stage businesses with a clear growth plan and mature businesses with predictable revenue and strong forecasting capability is key to note that whilst the discounted cash flow method is widely accepted and understood, valuations from this method can vary widely depending on the assumptions and inputs of the analyst (e.g. discount rate, future cash flows and growth rates). In order to prepare a robust and defensible valuation using a DCF method, assumptions and inputs should be reasonable, documented and justified.

2. Market Comparables / Transaction Multiples

How it works:

The comparables approach benchmarks your company against other businesses in your sector that have recently sold or raised capital. The valuation is based on financial multiples like EV/EBITDA, EV/Revenue, or Price/Earnings. Public comparables, M&A databases, and recent CSF/VC raises are common sources.

Why it’s useful:

If a broad range of data, with multiple datapoints is available for businesses similar to your own, comparables can be an accurate indication of what the market is willing to pay. Comparables anchor your valuation in real-world data, helping investor confidence that the valuation is a fair and accurate view.

Suitable for:

Both high growth and mature companies and for businesses executing capital raises, M&A transactions, and companies in active sectors (e.g., fintech, consumer brands, ecommerce, SaaS).

3. Capitalisation of Future Maintainable Earnings (FME)

How it works:

FME values a business by estimating its average “maintainable” annual profit which is adjusted for any non-recurring or abnormal items. A capitalisation rate (the inverse of a valuation multiple) that reflects industry norms and risk as well as company risk is then applied to the maintainable earnings of the business to calculate enterprise value.

Why it’s useful:

This method is widely accepted in the Australian SME market. It’s straightforward, reliable, and commonly used by brokers, valuers, and accountants when valuing profit earning and operationally stable businesses. It assumes that a buyer is primarily interested in future earning power based on historical performance.

Suitable for:

Profitable, mature SMEs with consistent operating history.

4. Net Tangible Assets (NTA)

How it works:

This method values a business based on its tangible assets (property, plant, inventory, cash) minus liabilities. Adjustments are often made to reflect the market value of assets rather than book value. It ignores intangible assets like goodwill or IP.

Why it’s useful:

NTA provides a “floor” valuation, what the company would be worth if it was liquidated today. It’s particularly relevant for companies where physical assets drive value rather than earnings (e.g., manufacturing, agriculture). It’s also used in distressed scenarios or where future income is uncertain.

Suitable for:

Asset-heavy businesses, investment vehicles, or businesses nearing wind-down (e.g., transport, mining, warehousing).

What method should you use?

If you’re looking to raise capital and you are unsure what method to use or are just curious about where your business stands in the market, OnMarket has deep industry experience to help you get clarity and extract the true value of your business.

Please get in touch with Josh Chan, at josh@onmarket.com.au, to learn more.